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Lane downplays urgency of September meeting for ECB shift
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Lane downplays urgency of September meeting for ECB shift

by Kathryn OGLESBY 2 min. 17.06.2021
ECB officials last week pledged to continue bond-buying under their pandemic emergency program at a faster pace through the third quarter
The European Central Bank
The European Central Bank
Photo credit: AFP

European Central Bank chief economist Philip Lane signalled that September may be too soon to start discussing shifting away from current ultra-loose monetary policy.

In an interview with Bloomberg Television, the Executive Board member pushed back against the perception that the central bank will likely consider how to unwind its monetary stimulus soon, as the economy rebounds and inflation accelerates.

“We’re not necessarily going to have every piece of hard data you want to have going into the September meeting,” he said.

The comments by Lane, who writes the monetary policy proposals, suggest that officials may find the euro area’s economic outlook too uncertain to take their foot off the stimulus pedal. Households and businesses are still reliant on support, and coronavirus developments as winter starts are unknown.

While some officials are warning about inflationary pressures, Lane said he sees few signs of this translating into higher wages and creating a upward spiral of prices.

The ECB has pledged to keep financing conditions favourable as long as needed, and most officials have avoided talking about tapering the central bank’s bond-buying program to avoid driving market rates higher.

“It’s unnecessary and premature to talk about these issues,” Lane said.

ECB officials last week pledged to continue bond-buying under their pandemic emergency program at a faster pace through the third quarter than at the start of the year, even as staff raised their forecasts for the region’s economy.

Lane said the pace of purchases over the summer months -- when liquidity is thinner and smaller buying volumes can have a bigger impact -- won’t follow a fixed volume.

“We basically decided to maintain the same stance,” he said. “We’re going into a very interesting summer, and the challenge of preserving very favourable financing conditions -- we have to keep our eye on that.”

​The ECB’s latest projections show inflation accelerating this year before dropping later, as issues such as supply shortages and a surge in energy costs fade.

Even so, some of Lane’s colleagues on the Governing Council have warned against upside risks to the outlook for prices. Dutch governor Klaas Knot and Germany’s Jens Weidmann both broached the topic this month, and Austria’s Robert Holzmann said that if inflation exceeds 3%, then policy makers would need to consider acting.

Lane reiterated that he sees no reason to believe higher inflation rates will become entrenched just yet, especially as unemployment in some parts of the euro area is still high.

“We know we have to focus on the medium term,” Lane said when asked about Holzmann’s remarks.

The euro weakened as Lane spoke, extending losses incurred on Wednesday after a hawkish shift in the US Federal Reserve’s outlook for interest rates. 

Lane emphasized the different challenges facing the ECB compared to the U.S. central bank, “both in terms of the state of the pandemic recovery, in terms of reopening the economy, but also in terms of the wider inflation dynamic.”

©2021 Bloomberg L.P.


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